Gold, Silver, Metal Prices Commentary – June 14, 2010

The Miners Who Stare At Goats

Good Morning,

Safe-haven oriented gold demand ebbed at the start of the new trading week as improved risk appetite diverted fund flows into other assets. The reverberations from the consumer confidence indicators that lifted equities markets late last week coupled with the far better than anticipated figures of Eurozone industrial output converged this morning and pressured bullion values back towards the $1220 support zone.

A fresh gain in the euro (last seen trading above 1.225) and a concurrent hefty decline in the US dollar (down 0.81 on the index, to 86.49) contributed to further selling in the yellow metal. At the same time, the improving outlook on the economic front bolstered the white and noble metals this morning.

The euro also probably got a boost from the news that national regulatory bodies could be resorting to ’emergency powers’ in order to prohibit nudity among short-sellers of CDS instruments. Take zat! The Merkel-Sarkozy team shoots another guided missile across the bow of the vigilantes who have been wreaking havoc with all things European in flavor.

US stocks gained some energy and the Dow rose to 10,275 following an overnight gain of 174 points in the Nikkei Index — both indices benefiting from the aforementioned combination of optimism-inducing factors. Crude oil was showing strong, $2+ per barrel gains this morning. The spectre of the "W" was placed on the back-burner this morning following a nerve-wracking couple of weeks in the markets. This is precisely the kind of amelioration that gold buyers did not care to hear about this morning.

The latest price indications showed gold spot trading at $1219.50 after having touched a low of just under $1218.00, while silver gained 19 cents to rise to the $18.41 mark. Platinum added $13 to reach above the $1550.00 pivot point, while palladium climbed $6 and was quoted at $453.00 the ounce.

Rhodium showed no change at the $2390.00 bid level. If the tenor of the conversations we have had with experts in the field at the IPMI Conference in Tucson AZ is any indication, the noble metals complex could be looking forward to continued vigor as carmakers and investors alike remain takers and supporters of higher-tier prices.

A not too dissimilar market environment is being projected for silver as well (at least for the next trimester) by speakers at the IPMI conference. CPM Group NY opined that a probable continuation of investment demand above the 220 million ounce per annum level for a second year could put a possibly higher than normal floor under what can traditionally be expected to be a summertime seasonal decline in the white metal. However, industrial demand also needs to do its share in order for silver to maintain the above-$15 value proposition.

As for gold, the summer doldrums may not yet be fully manifest however projections for physical demand from India reveal that analysts expect perhaps only half as much bullion to flow into the country during the current month as was imported one year ago in June. That figure would be about 15 tonnes at best, owing not only to ultra-high gold prices but also to the start of monsoon-related farming activities. Said near-record prices have been defining the demand (the lack thereof, that is) for gold in the UAE.

So finds the Emirates Industrial Bank in a report seen on Zawya.com which concludes that "the virtual explosion in gold prices has had a considerable impact on demand for gold, particularly from the jewellery industry. The impact of the price rise is clearly evident from the import demand in the country.

The EIB’s figures showed the volume of gold imports by the UAE plunged from a record high of around 915 tonnes in 2005 to less than 350 tonnes over 2006 to 2008."

On the other side of the market ledger, in news from the supply side, a minerals strike of vast proportions was announced in Afghanistan overnight. Huge deposits rich in copper, gold, cobalt and especially lithium on a scale that reaches into trillion-dollar territory are not something one hears of very often at a time when shouts of ‘peak everything’ are commonplace in the markets.

There’s gold in them thar’ desolate Afghan hills upon which only goats normally tread. Now, it is but a matter heavy machinery making tracks on said hills of bringing all the stuff up. Certainly, as far as lithium is concerned for example, Afghanistan is about the corner the conveyer belt of supplies flowing into the world. Opium? That’s so…90’s. The Taliban and assorted easy-to-corrupt locals of the official ilk might now be duking it out over a far more powerful obsession. Gold fever comes to mind. An intoxicant like no other. Klondike in Kabul, if you like. Go long shovels and picks.

Back to flying…for a change. The desert Southwest was loads of fun but the calendar marches on…

Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America 

In gold collector coin news, the first weekly figures are in for the new Buffalo coins. For more, read 2010 Buffalo Gold Proofs Earn $22.7M in Sales Debut.